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Changes in the economics of information

In the last few years a 400-year-old age is dying and being replaced by a webbed world. This is profoundly changing traditional business strategy. Old ways of doing business simply won't work any more. It's all because the economics of information have changed fundamentally and in an information age this is critical. This change is destroying industries, and threatening the fundamental rationale of organisations built around the information economics of a previous age. In a webbed world, things happen very fast and if your organisation reacts too slowly or in an inappropriate way then the result could be catastrophic.

What’s it mean

These changes in the economics of information threaten to undermine established value chains for any industry where information matters. Basically Evans and Wurster expect the value chains of these industries to fragment into multiple businesses.

This includes many industries, like health and motor vehicles (see example below) that we don’t often think about as ‘information’ industries, as well as those we do such as newspapers and banking.

Some Guiding Principles

1. No business leader today can presume that the business definitions in their business will still be valid a few years from now.

2. Deconstruction is most likely to strike in precisely those parts of the business where incumbents have most to lose and are least willing to recognise it.

3. Waiting for someone else to demonstrate the feasibility of deconstruction hands over the biggest advantage a competitor could possibly wish for: time.

4. Leaders need to wrestle with the full range of possible patterns of deconstruction.

5. Strategy really matters. In a deconstructing world, strategy creates economic realities. Whether a standard does or does not reach critical mass, who pre-empts whom, and who allies with whom, determine not just the path of competitive jockeying, but the end result itself. The interplay of strategies among competitors has an autonomous impact in shaping the outcome.

6. The value of winning will escalate, as will the cost of losing.

7. The reconstructed business definitions will rarely correspond to the old.

8. The hardest step for an incumbent organisation is the mental one of seeing the business through a different, deconstructed lens and then acting on this insight.

9. The traditional, hierarchically defined roles of leadership become obsolete.

Written by B Holland. Give him a call if you want to know more.